MIAMI – A $75 million settlement has been approved between American Express Co. (AXP) and thousands of cardholders who contended in a class-action lawsuit that they paid hidden transaction fees for charges made in foreign currencies.
The settlement, approved this week by U.S. District Judge Cecilia M. Altonaga, affects more than 833,000 cardholders who paid some form of transaction fee from March 28, 1997, through Oct. 15, 2004. Settlement amounts could range from $15 to millions of dollars, lawyers involved in the case said Friday.
The lawsuit, initially filed in state court in August 2003 and then transferred to federal court, claimed that American Express failed to adequately inform cardholders that they would be charged an adjustment of up to 2 percent for the conversion of charges made in foreign currencies to U.S. dollars.
Instead, the fee was embedded in the transaction amount that showed up on cardholders' bills, making it "invisible to consumers," said the lawsuit filed by Edward LiPuma, an anthropology professor at the University of Miami who was represented by attorneys Tucker Ronzetti and Adam Moskowitz.
"We are pleased that the class is able to get substantial relief and that American Express agreed to change its business practices," Ronzetti said of the settlement.
Although it settled the case, American Express did not admit to any wrongdoing and maintained that its conversion practices were fully disclosed, said spokeswoman Judy Tenzer. American Express did, however, change its notification practices to spell out the conversion fees more clearly, she said.
"We are settling to avoid the costs and risks of prolonged litigation," Tenzer said.
About 8.8 million notices have been mailed out to American Express cardholders potentially affected by the settlement, with 833,751 responding to file claims as of Oct. 30, Ronzetti said.
Of the $75 million, up to $11 million will go to attorneys' fees and costs, with most of the rest to be divvied up among the affected cardholders.
For foreign charges made prior to Feb. 1, 1999, the total payment will be $15 per claim, while charges made after that date will be reimbursed based on the total conversion fees charged, according to the agreement.